How Federal Ruling To Wipe Medical Debt From Credit Reports Disproportionately Helps Black People

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On Tuesday, the Consumer Financial Protection Bureau (CFPB) announced a new federal rule aimed at removing medical debt from the credit reports of millions of Americans. According to ABC News, this ruling could potentially erase an estimated $49 billion in unpaid medical bills from the credit reports of approximately 15 million individuals struggling with overwhelming medical debt. The new ruling could help millions of Black families who are often saddled with medical debt at a higher rate compared to other ethnicities.

A credit score, which ranges from 300 to 850, reflects a person’s creditworthiness—essentially how likely they are to repay borrowed money. It is calculated based on information from a person’s credit report, which includes details about their credit history, payment behavior, outstanding debts, and other financial activities. This score plays a key role in determining one’s ability to secure loans, credit cards, or mortgages, as well as the terms of those loans, such as interest rates. Higher credit scores often lead to better rates and more favorable loan terms, while lower scores can result in higher rates or even loan denial.

The new ruling could improve the credit scores of borrowers burdened by medical debt by an average of 20 points, potentially helping them qualify for mortgages and other financial products. This change may be especially beneficial for Black Americans, who have historically faced significant barriers to accessing loans due to lower credit scores, often influenced by the weight of medical debt along with other outstanding bills.

“No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Vice President Kamala Harris, a leading supporter of the measure, said in a statement about the new rule.

Black people have higher medical debt due to a complex web of issues.

Medical debt impacts millions of Black Americans at a higher rate due to a complex storm of factors. Americans spend an average of $12,530 annually on medical expenses, including deductibles and premiums. This amount represents nearly 20% of the median household income of $67,521, based on 2020 U.S. Census Bureau data, CNBC reported. Further breakdowns show that approximately 41% of U.S. adults—roughly 100 million people—are currently burdened with medical debt, with amounts ranging from less than $500 (16%) to $10,000 or more (12%), according to a 2022 poll from the Kaiser Family Foundation (KFF). However, the financial strain is disproportionately heavy on Black communities. A nationwide KFF poll also revealed that 56% of Black adults are dealing with medical or dental debt, compared to 37% of white adults. Among those with debt, 56% of Black Americans owe less than $2,500, while 44% carry debts of $2,500 or more.

This disparity is further compounded by lower income levels. According to a 2024 U.S. Census Bureau report, the median household incomes for Hispanic ($65,540) and Black ($56,490) families in 2023 were the lowest across all racial and ethnic groups, and have remained largely unchanged from the previous year.

Health disparities also contribute to the burden. Black Americans face higher rates of chronic conditions such as heart disease, diabetes, and stroke, which often require more intensive and costly care. Yet, due to their lower incomes, many are unable to afford the ongoing treatment needed to manage these health issues. In fact, a 2021 survey found that 14% of Black Americans skipped necessary medical treatment due to cost, compared to just 9% of white Americans.

The consequences of medical debt extend beyond financial hardship; it also worsens health inequities. When individuals are unable to pay their medical bills, they are less likely to seek care when needed, which can lead to more severe health conditions. Eventually, when they do seek treatment, it is often more complex and costly, perpetuating a vicious cycle of escalating debt and worsening health. Medical debt, in this sense, is not just a symptom of racial inequities—it compounds them, creating a cycle that is difficult to escape.

With the new ruling removing credit as a barrier for medical debt, Black Americans may find some relief, easing one of the many financial burdens they face and giving individuals more opportunities to access necessary services without the added worry of damaging their financial standing. While this ruling is a positive step, the fight for access to affordable health care is far from over.

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